After posting a loss in 2011, Itella faces a strategic dilemma

February 17, 2012 – Itella (the Finnish Post Group) has announced today disappointing results for 2011. In spite of a 3.2% revenue growth (at EUR 1,900 m) profitability declined and the company posted a EUR 5.9 m operating loss (vs a EUR 32.4 m operating profit in 2010).

The (physical and digital) Mail Communications division fared comparatively better than other businesses. E-commerce growth boosted the parcels business (+7%), addressed mail volumes declined “only” by 2%, and NetPosti’s 300,000 users sent 63% more electronic letters than in 2010. However pressure on mail prices and “a fixed cost structure” drove down profitability, and Mail Communications ended the year with an operating result of only EUR 31 m on a EUR 1.1 b revenue. The two other divisions – Information (outsourcing of financial and accounting processes) and Logistics- both posted losses in 2011.

CEO Jukka Alho addressed the Post’s strategic dilemma – refocus on the core or pursue diversification more aggressively ?  “The impact of electronic communications shows especially in the decline of the print media’s delivery volumes. The vital question of how to secure future funding for the universal service obligation remains unsettled (…) During the past few years, the company has been engaged in an active – at times even risky – search for growth. It is now time to review such ventures further and decide which investments show future promise and which ones to abandon”.  Implementation has already started and Itella’s  Danish CRM business was sold in January. On the other hand Itella confirmed it would continue “to invest heavily in the promotion and development of electronic services” . More specifically, the company is going to leverage  new Itella Bank Ltd  to develop e-payments solutions in support of its NetPosti and e-commerce business.

The Itella CEO expressed a cautious optimism for 2012, with flat revenue and return to profitability expected for this year. “The company’s future outlook”, he concluded, “is not only challenging, but inspiring.”

More information on Itella site at http://www.itella.com/about/financials/annualandinterimresults/year2011.html